In July 2017, four joint ventures were awarded HS2 civil contracts worth a combined £6.6 billion. The original structure was a target-cost contract with a pain/gain share, meaning that if costs overran, the contractor would absorb 60 per cent of the increase. But the terms had no cap on liability, which was far harsher than the industry standard. The contractors responded rationally. They loaded risk premiums into their estimates, adopted conservative designs, and refused to absorb scope changes without compensation. The terms were unworkable, and everyone involved knew it. When construction was formally approved in April 2020, the contracts were renegotiated. The target costs were removed entirely. What replaced them was, in practice, cost-plus. The contractor is reimbursed for whatever it spends, plus a percentage-based fee. The more the project costs, the more the contractor earns. HS2’s own executive chairman, Sir Jon Thompson, told the Public Accounts Committee, the Commons committee responsible for scrutinising government spending, in November 2023, “We have to be upfront with you now, the Government decision to let cost-plus contracts where there are very few incentives or penalties around them does not provide me with any real levers on contractors.” He added, “If they spend 100% more than what was agreed, they only get 1% reduction in their fee.”
The contracts were awarded at £6.6 billion. By the time construction was approved, they had nearly doubled to £12 billion. By 2023, they had reached £18 billion. The Stewart Review, commissioned by the government to examine what had gone wrong, found the contract model was “by far” the main contributor to cost escalation. The risk, on paper shared, was in practice transferred entirely to HS2 Ltd, which is to say, to the taxpayer. Who authorised this? Thompson called it “the Government decision.” The Transport Secretary at the time was Grant Shapps. The Department for Transport’s Permanent Secretary was Dame Bernadette Kelly, the same official the Public Accounts Committee later found had failed to disclose what she knew about cost overruns when asked directly by Parliament. The procurement framework itself was designed by Beth West. But nobody will say “I made this decision,” because the structure is designed so that nobody has to.
When a Freedom of Information request was submitted for the cost of the “bat tunnel” – one kilometre of tunnelling to protect a bat habitat – HS2 Ltd refused, citing commercial sensitivity. The figure was eventually disclosed not by HS2 but by its own chairman, inadvertently, at an industry conference. It was £216 million. For one kilometre. Community mitigation costs alone rose from £245 million to £1.2 billion. Nobody has explained who authorised these figures or why. Thirteen firms each collected over £1 billion. The Big Four accounting firms, PwC, Deloitte, Ernst & Young, and KPMG, took over £220 million in consulting fees between them, with dozens of other consultancies sharing further amounts. Tens of millions more went on legal fees, public relations and stakeholder engagement. Nobody has published a clear breakdown of what services these sums purchased. When Phase 2 was cancelled, £1.25 billion had already been paid to consultants and contractors for work that will never be used. Arup alone received £272 million. A further £289 million was spent on design fees for Euston, of which £106 million went on designs that were subsequently scrapped when the station was redesigned. The money is gone.
Seven of HS2’s main civils contractors were members of the Consulting Association, a covert organisation that blacklisted 3,213 construction workers for trade union membership and raising health and safety concerns. Beyond blacklisting, their collective record includes fraud convictions, forced labour indictments, bid-rigging fines, and World Bank sanctions. In 2025, HS2 Ltd began investigating allegations that parts of the supply chain had been defrauding taxpayers, with inflated worker rates, bribery, and offshore payroll companies used to hide false payments. None of these firms were excluded from bidding. The firms are not passive recipients. The people who run them are embedded inside the architecture that awards the contracts.
Patricia Hayes spent thirty-six years at the Department for Transport, including as Director General for Roads, Places and Environment, running the investment committee that had oversight of HS2 during its procurement phase. In October 2023, ACOBA cleared her to become Independent Chair of the Integrated Programme Team Partnering Board, the governance forum of SCS Railways, the joint venture holding the southern tunnels contract. ACOBA’s rationale was that she had not been “personally involved” in HS2 decisions. Fabienne Viala led Bouygues UK, the UK arm of the contractor responsible for the Chiltern tunnels, until 2023, and was subsequently appointed to the HS2 Ltd board itself. The client organisation now includes on its board someone who, until recently, ran one of its major contractors. Neither arrangement has been examined by Parliament.
When people inside HS2 tried to raise the alarm, the system removed them. Stephen Cresswell, a cost analyst, warned that cost forecasts were being manipulated. He was told to “concentrate on something else.” His contract was terminated. In June 2025, an employment tribunal ordered HS2 Ltd to pay him £319,070 in compensation. The tribunal found he was punished for whistleblowing. No investigation into the underlying claims followed. Doug Thornton, the land and property director, planned to raise concerns at a board meeting. He was sacked eleven minutes after filing a grievance. An anonymous female employee had her phone confiscated after being seen with a whistleblower. She was eventually sacked too. The Sunday Times investigation in October 2023, headlined “Exposing a multibillion-pound cover-up at HS2,” reported that senior executives shredded documents and used misleading projections to ensure money kept flowing. Whistleblowers were “quietly bought off and offered generous redundancy terms.” The Serious Fraud Office received statements from former HS2 Ltd employees alleging fraud, bribery, and corruption in the award of contracts. No charges have been brought. The Public Accounts Committee has published a decade of devastating reports. It found that the Department for Transport and HS2 Ltd knew about cost overruns from October 2018 but did not disclose them to Parliament. Dame Bernadette Kelly, the Department’s Permanent Secretary, had “sailed close to the wind” when questioned. The Cabinet Office refused to investigate. By February 2025, the Committee was calling HS2 a “casebook example of how not to run a major project,” and noting that its own previous recommendations had not been implemented. The review that was supposed to scrutinise the project from outside was itself compromised. During the 2019 government-commissioned independent review of whether HS2 should proceed, its chair attended a private dinner with executives from firms that were simultaneously paid HS2 consultants and listed as contributors to the review. No other panel members were informed. The review recommended proceeding with HS2.
To be continued…………
© DJM 2026
